Why are interest rates considered to be the opportunity cost of investments?
Interest rates reflect peoples' preference for consumption goods that are available immediately (or sooner) over goods that are only available later. They also reflect the productivity of investment as savings are used to purchase capital goods that produce output over longer spans of time. Interest is an opportunity cost. Investments that produce income over the future must entail forgone consumption in the present.
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A change in autonomous consumption causes a movement along the aggregate expenditure line, while a change in consumption that depends on income causes a shift of the aggregate expenditure line
a. True b. False
A major concern with the Social Security trust fund is that:
A. Surpluses for Social Security are too large B. The Federal government buys too many government securities C. Costs for administering the fund are greater than the current revenue D. The fund will exhausted in a couple of decades